Market Watch: Economy yet to recover, more stimulus measures to come

Global markets, including the Stock Exchange of Thailand (SET), reacted negatively to a spike in the number of coronavirus fatalities and new cases in Hubei Province on Thursday. However, the impact was marginal.

The SET went down slightly on Thursday by 7.07 points, or 0.46 per cent, to close at 1532.77 points with a trading value 46.3 billion baht. Japan’s NIKKEI lost 0.48 per cent, China’s SSE Composite was down 0.21 per cent, Hong Kong’s HIS dropped 0.11 per cent, and Korea’s KOSPI lost 0.01 per cent.

The US’s DJX was also down by 0.43 per cent while STOXX Europe 600 lost 0.02 per cent. London’s FTSE 100 went down by more than 1 per cent as the first person diagnosed with coronavirus was found in London on Thursday.

The fact that the spike was due to Beijing’s decision to use a broader definition to diagnose people and that Asian markets did not panic, shows that investors have absorbed a lot of the news about the outbreak over the past month already.

Other indicators also reflect this; crude oil prices, WTI and Brent, increased by 0.5 and 1 per cent to US$51.42 and US$56.34 per barrel, respectively. The Organization of the Petroleum Exporting Countries (OPEC) already announced its cut in production by 400,000 barrels per day and OPEC+ is expecting to do the same, as global demand is being hit by the outbreak.

Closer to home, the Thai baht opened at 31.15 baht per US dollar today, slightly weaker than its closing value at 31.12 baht on Thursday. Jitipol Puksamatanan, an investment strategist at SCB Securities, sees the baht in the range of 31.10 to 31.25 baht on Friday, as trading activity is expected to be low while investors are waiting for real GDP numbers from 2019, which will be announced by the Office of the National Economic and Social Development Council on Monday.

Other factors that could influence investors on Friday include the parliament’s decision to pass the 2020 fiscal year budget bill during its revote on the second and third readings on Thursday. The news creates a positive sentiment for shares of companies that have contracts for government investment projects. The Senate will debate the bill on Friday for re-approval before they send it for publication in the Royal Gazette.

Don Nakornthab, senior director for macroeconomic and monetary policy at the Bank of Thailand (BOT), made a comment that could negatively affect the market when he told a seminar on Thursday that if the number of tourists drops by 5 million people, the tourism sector could lose around 250 billion baht worth of income. If that happens, Thailand’s GDP could expand by only 1.3 per cent this year.

The BOT’s latest estimation is at 2.8 per cent. But if the outbreak causes Thailand’s 6 trillion baht GDP to be reduced by 250 billion baht, 1.5 per cent would be shaved off from economic growth, he clarified.

On Friday afternoon, Deputy Prime Minister Somkid Jatusripitak is expected to hold a meeting with the Ministry of Finance, the Ministry of Tourism and Sports, and the Joint Standing Committee on Commerce, Industry and Banking to come up with more stimulus measures for the economy.

The Deputy Prime Minister now believes that the Thai economy will not expand more than 2 per cent in 2020, as the last quarter of 2019 and the first quarter expansion are expected to be less than 2 and 1 per cent, respectively.

The Cabinet on February 4 previously approved measures to reduce excise tax on aviation fuel, allow a tax deduction of two times the expenditures for meetings, incentives, conferences and exhibitions (MICE) tourism, and provide soft loan policies for corporations looking to invest or improve existing infrastructures.

The policy interest rate is also already at its historic low of 1 per cent but it appears these fiscal and monetary policies are still not enough to help with the recovery of the economy, which has been badly hit by the coronavirus outbreak and the worst drought in 40 years.